A government crisis this week in Vilnius over the sell-off of a third of the country's chief oil refinery to a U.S. company suggests that Lithuania -- as well as other East European nations -- may be becoming more skeptical about Western investment in the country. It also could lead to the fall of the current government before the end of the month. Correspondent Joel Blocker explores the implications of the crisis with the director of RFE/RL's Lithuanian Service, Kestutis Girnius.

Prague, 21 October 1999 (RFE/RL) -- Lithuania's government crisis over the impending sale of one-third of its state-owned Mazeikiai oil refinery to a U.S. company broke dramatically into public view this week during a nationwide television address by Prime Minister Rolandas Paksas.

Paksas -- himself only five months in office -- said on Monday (Oct. 18) that 18 months of negotiations with the Oklahoma-based Williams International Company had ended in a deal decidedly disadvantageous to Lithuania. That, he said, was largely because the final accord, due to be signed in eight days (Oct. 29), required liquidity-strapped Vilnius to pay out up to $400 million to Williams to cover both debts and a shortfall in Mazeikiai's working capital.

The day after Paksas's speech, the crisis grew with the announcement of the resignations of Lithuania's finance and economics ministers, both of whom expressed their agreement with Paksas's objections to the deal. But the rest of Paksas's 15-member coalition cabinet support the idea, and President Valdas Adamkus -- U.S.-born and a former American citizen -- strongly backs the deal. After the cabinet approved the deal Monday night and Adamkus accepted the two ministers' resignations, the president said he was not necessarily for Williams but for what he called terms "beneficial" to Lithuania.

Speaking for Premier Paksas, economic adviser Eduardas Vilkas saw the matter very differently. He called the Williams agreement "completely foolish," saying, "We must finance $400 million [to Williams] immediately, while the Americans stagger their payments. It isn't right." American payments are to total about $150 million.

According to Kestutis Girnius, director of RFE/RL's Lithuanian service, the Williams crisis has important implications for changing East European attitudes toward Western investment. Girnius says:

"I think there's [now] a general tendency ... to look askance at certain Western investments. ... And of course a little bit of anti-Western -- I'd say -- skepticism about the West is growing also. ... And I think it's true in a lot of Central Europe -- that these major projects [such as Mazeikiai] so typical [of the Soviet Union are now considered] almost as the pride of the industry of Lithuania. Giving them up is seen as a sign of defeat."

Girnius believes this new tendency also reflects what he calls a change in attitude toward Russia. He says there is a much greater willingness in Lithuania today to accept Russian oil as the country's principle source of energy. That, too, could play a role in the evolution of the Williams crisis, because Russia's oil giant Lukoil has cut off supplies of crude to Lithuania in protest over the sale to Williams. Lukoil itself had hoped to purchase a controlling share in Mazeikiai.

According to Girnius, the Williams accord could easily bring down the Paksas government on or soon after October 29, the day the deal is due to be signed. He thinks the government's biggest mistake in the affair was not setting up a public tender for Mazeikiai, which created the impression the government was in effect giving the huge refinery away. As for the immediate future, he says:

"I believe that they will not do anything until (Oct.) 29th. After the deal is signed, then I think there is a great possibility that pressure will increase for Paksas' resignation. But in the long run, [it will turn out that] his popularity has soared."
Girnius says that Paksas is already seen by the public as "a defender of the little man, a folk hero." That, he adds, may turn to be the most important domestic consequence of the Williams affair.

As for its international implications, it is clear that the government crisis and public concern over the Williams deal is a sign of rapidly changing attitudes toward Western investment. How small or big a sign it is will only be known over the weeks and months to come -- in Lithuania and elsewhere in Eastern Europe. But the Williams affair strongly suggests that the change is well under way.